Whether you are for a new arena or opposed to it, tomorrow you will have your chance to voice your opinion. We are damn lucky we live in a country that allows us to speak our mind, so I suggest you make a trip to city hall or email Councillors@edmonton.ca and let them know where you stand.
There are lots of hot topics and a few issues that seem to have been misrepresented. I caught up with councillor Kim Krushell to try and give you some more insight into some of the more pressing concerns.
JG: If I’m not mistaken, you were not a big supporter of the Indy, but you support the arena deal. How come?
KK: “I think the difference here is one of scale. First of all, let’s face it; having an NHL team in your city does add value to the city. Not having one – and we’ve all seen what happened in Winnipeg… I mean when I was door knocking in my ward, interesting enough, I had people saying, ‘Whatever happens just get us a good deal,’ but they didn’t want to be Winnipeg before the Jets returned, and now look what the Jets have done to that city.
“It’s amazing. I found out that Stantec, which is a corporation out of Edmonton, has offices in Winnipeg and they have moved all of their offices into an Urban Centre part of the MTS. They are one of the anchor tenants that are already helping to redevelop the downtown of Winnipeg right now.
“Quite frankly, as a city councillor, we’ve been doing everything to try to revitalize our downtown. Obviously we’ve encouraged developers with tax incentives to get more residential development in the downtown, but this arena deal isn’t just about an arena.
“It’s really a downtown entertainment complex and when you think about that, you realize that if we get this thing done, not only will it be the catalyst that starts a whole bunch of other projects in our downtown, but, and this is a conservative number, we would be looking over 20 years at $1.2 billion in new tax revenue.
“I think that is a key point that the citizens need to understand when they are asking ‘what’s in it for us.’ That’s a pretty big, ‘what’s in it for us.” and we don’t have a lot of risk in this deal and that’s another reason why I’m supporting the deal.
JG: You are saying under the deal Katz kind of assumes all of the risk. How so?
KK: "Basically, what Katz is agreeing to is – sure, he is getting the revenue, but he has to pay for all operations, all maintenance, and here is the kicker – he’s got to pay for all long term capital. And – he’s got to compete against Northlands.
"Now a lot of people think, ‘well, maybe that’s not such a big deal’. I actually do think that it is a big deal and the reason is because promoters, when they are looking at bringing their big stars into Edmonton, one of the challenges that have happened with the existing facility is finding the dates to get Madonna to be able to play here, to get Brittany Spears, to get Maroon 5. These acts come through and you will see them on a Sunday or Tuesday night.
“If you have a facility with all their dates available, you can imagine that that’s going to be pretty tough for Katz to compete with. I think that citizens need to understand whether you like Katz or not, and I would suggest he could have done better with some PR here with this team; the fact is he’s the one putting skin in the game. He is putting $100 million in. There is debate on how he’s putting the $100 million in, but it is a fact that it will help him put the other $100 million in which is subject to market conditions in the surrounding development.
“And why is that important to us? Because it is the surrounding development that will give us the big tax uplift, which gets us a lot of new tax dollars for our bottom line.”
JG: Is that $100 million up for negotiation? Do you think it matters if a little more of it comes up front or if it is spread over the term?
KK: “I don’t think many people have $100 million sitting in a bank account. I have no issue that he wants to do it over a period of time as long as he pays the full interest which is exactly what he agreed to do in the deal.
“In fact, I think it helps us in the sense that it will allow him to make that commitment with the other $100 million that he wants to use to put into the surrounding development that gets us the hotels, and all of the other development that makes this an entertainment complex and area.
“So, I think that it is fine. The reality is that if he doesn’t meet his commitments we own the arena and we also own the land. So when you have a tenant that doesn’t pay your rent, what do you do? You evict them and you also take any revenues that are part of the facility.
“With that NHL agreement we have in place, the NHL has to sign off on that 35 year no-movement clause, and so whatever happens – and I believe Katz will meet his commitments, but if something did go wrong,- we would have still a hammer. Who ever comes into the situation would be dealing with the City of Edmonton, because we’ve got the new facility, it’s ours. Not only that, Katz has to maintain it and keep it a new facility. He is responsible for all the long term capital. When the arena needs upgrades he has to pay for it.”
JG: Northlands presented a report back in 2007 that the city needed a new facility, it wasn’t Katz, but why has nothing been solidified in four years?
KK: Originally, Northlands commissioned HOK, now Populus, which is an expert consulting group that came and looked at the existing facility. Everyone knows it was built in 1974, it had renovations done in 1994 and it still isn’t quite up to par for NHL standards.
“What HOK said was, ‘You are going to have to put at a minimum, at that time it was $250 million, into renovating the existing facility.’ And we were told to do that we’d have to take out more general seating than you’ve got right now in order to get those group suites that really make it competitive.
“When we talk about group suites, I’m talking about getting a group together like a minor hockey team and they want to rent a big box, right now they are all corporate, so it’s tough to do. These are some of the ways that you make money in the NHL in these new types of entertainment complexes that are being built.
“Ours is second oldest in the league, so we know it’s due. The issue council had from day one is – do you want to put $200 – $250 million into the old facility and not really get what we expect today, or do you want to go in with a deal with somebody who is at least going to put $100 million in to the actual arena building, as well as put $100 million into the surrounding development and get us a full on entertainment complex and help revitalize our downtown.
“The other thing people have to realize is when you have the entertainment complex downtown, you generate all these people from outside Edmonton who actually come to the Oilers games. Right now, they’re not seeing our downtown and we’ve done a lot to improve it. We have the new Art Gallery, we are going to get a new museum, and we have the Citadel – All these things around our downtown that no one ever sees unless they are coming here specifically for those other events. So this will get a lot of people, I think, into our downtown to see other things that are going on in our downtown.”
JG: What is this $2 million the Katz group is looking for from the City as far as advertising?
KK: “Well that is the one area where I do have some questions, when it comes to questions to administration, but you know I’m not hung up on it necessarily. The deal is, Katz is saying for the Indy – and he’s right, we did a big, huge marketing package. Now on scale, let me be real, it’s not the same amount of cash, but what he’s asking for in the deal is that we come in at $2 million per year for a 10-year commitment, so you are looking at $20 million in total,
“We haven’t been great as the city of Edmonton in terms of marketing. I hear complaints about that all the time. When you go out of Edmonton, lots of people in the States, you name it, they don’t know where Edmonton is, but they know who the Oilers are.
“Even though they are called the Edmonton Oilers, we haven’t done a good external marketing job. One of the things that we would be requiring out of this package would be that any other sponsors that come in at the same price point, we get what they get; which is what they call the Favored Nations Clause.
“The second thing that we would be doing is requiring that this be a big marketing package where we have the name prominently displayed, and we tie ourselves into the Oilers much more effectively in other markets. We aren’t talking about Edmonton markets. So that people understand that there is a brand behind the city that has the Oilers, which I think is really critical.
JG: The CRL is still part of the deal, but does it in fact take money out of education or medical funding?
KK: “It is a tough one to explain, but basically here is what a community revitalization levy will do. We are going to put a ring, so to speak, around a section of our downtown, not just where the arena is going to be built. The arena will be the catalyst project that starts this off.
“Any new development that happens, so any new building, will have a tax value to them. We are going to take that tax uplift. We are going to continue to take the regular taxes that we are getting from downtown right now and they will continue to go into general revenue just like everything else, but for the new stuff we are going to take the uplift and plow that into more amenities to dramatically improve areas like Jasper Avenue and make it really exciting so other investments will happen in our downtown.
“When we collect city taxes we are required by the province to collect the education tax. The interesting thing I found out is that the education tax doesn’t actually go directly to education. When the province collects it, after we collect it on their behalf, they use it for general revenue. They actually fund education through, more of a better word, a head tax of how many kids a school has, so they remit it differently.
“In reality, the province recognizes this and is saying, ‘that if you really want to revitalize an area we will allow you to access the education tax that we collect from those given taxes that you determine are new taxes, but only for new taxes, that are in an area that we see has value for revitalization.
“What it does in a way is it gives us 80 cents to the dollar. It is a big deal for us, because it really helps give us some real cash and it isn’t taking away from education, because that’s not how the province funds education.
“During the leadership debate (provincial) this is one of the issues that came out. We tend to get funded for municipalities through the province by grants. One of the debates was maybe we should remit the education tax, especially to larger municipalities, because quite frankly on the education tax room it almost doubles some cities revenue.
“So that is what we are looking to do. That is why this project isn’t just about an entertainment complex or an arena, it is going to help transform our downtown because there is more that we are doing to make that happen.”
JG: Right now the deal hinges on $100 million coming from the province, if that doesn’t happen what is the back up plan?
“To make this happen so we don’t have cost overruns – because that was one of my biggest concerns, so I wanted a $450 million cap – was to implement what is called a guaranteed maximum bid. That’s why the design costs will be on the higher end side, but there is a reason behind that.
“By spending more on design, we actually make it so whoever is the contractor that bids (they) know that based on these design parameters they have to come in at no more than $450 million. If they go over that, then they eat the costs, not the city and not Katz.
“That is why council can’t sit around and debate making a decision, in my opinion, much longer. The urgency isn’t regarding the land deal, we’ve taken that out of the equation, and the urgency isn’t even around the 2014 lease agreement with Katz and Rexall. The main issue in end comes down to contracting and getting contractors to sign on.
“We have a window right now where the interest rates are low, and we haven’t had huge projects take over all of our contractors yet, but we know they (projects) are in the wings. We know that despite the economic woes in the USA and Europe, China is projecting 9% growth and India is in the 7% range, and they still want our oil.
“We are seeing a potential of $290 billion worth of oilsands development. This is despite Robert Redford and his video and other things going on that we see in the media. The Oilsands are thinking 30 years out, so a lot of those projects are going to start happening and they are going to take a lot of contractors.
“If we don’t get in there now we are going to have challenges in two areas. One, in actually getting the facility built in the $450 million price range because we might not get a bidder; and then we have a real problem. The other issue we have is the interest rates. The one advantage we have as a municipality is that we borrow from the Alberta municipal financing corporation, which is basically the province of Alberta. We borrow at a lower interest rate than you or I can borrow from the bank.”
JG: Do you know what that interest rate is?
KK: “It changes based on prime, so at the moment I can’t tell you exactly what it is, but it is always way lower than prime. The key is that we (city) get to lock in our interest rate for the full mortgage. When we lock in for this building we are locking in for the full 35 years at that low interest rate.
“That’s why our city has been under construction hell for everybody this year and last year. There is method behind our madness. We are trying to get everything we can while the economy is on the slower side, because it is cheaper. We have low interests rate so we are saving tax payers money in the longterm. It is funny, politicians don’t often think longterm, but in this case I think we’ve been doing a good job. We are trying to do everything we can right now, because what we see coming down the pipe could change significantly.”
JG: Will there be a tax increase to support this project?
KK: “No. That’s one of the great things about this deal; we don’t have to increase your property taxes this is about our borrowing capacity.”
JG: Could I say this is an investment of taxpayer’s dollars in that we are spending them now to gain more tax revenue ($1.2 billion) in the future?
KK: “That would be a good way of looking at it, and this is the catalyst project that starts the ball rolling. We aren’t just talking about one project; we are talking about numerous ones. You know how it works with business, once one has gone in big they all migrate and others will follow. We have a plan, and the arena is just the first step.
“Let’s face it; no one is racing to come see the proposed site. Right now it is a bunch of gravel parking lots. To clean that up is a pretty big opportunity and we aren’t going to be displacing people.
“People have been asking what happens to those homeless shelters. We are going to be doing a community benefits agreement, we are going to be looking at how we need to work everything moving forward. Councillor Ben Henderson and I are on the housing initiative for council, and there are a lot of different things we are doing to house the homeless and looking at these issues.
“I really do see this as a win-win for everyone if we go forward.”
JG: Will there be a casino as part of this project, and who gets the revenue from that?
KK: “I can’t talk about the land deal, I can say there is a casino and I can tell you that a third party has the rights to the casino. It’s not Katz and it’s not the city. I want to be very clear here, that is not on the table here at all. That is the province of Alberta and how they run this, but this is not part of any deal with us.
JG: How can people sign up to speak at city hall tomorrow, and is there anything else they can do to voice their opinion, pro or con, regarding the arena?
KK: “We are already at 100 speakers, but you can still call 780.496.8178 to register or you can register at the stairs at the top of city hall, and go in there and say, ‘I want my say.’
“The other thing citizens can do is send emails and let councillors know what they think, whether it is yes or no. This is about our city and our citizens will be weighing in on it tomorrow. So far I’ve heard lots of positives, but there are also lots who don’t want us to spend tax dollars, but unfortunately there is lots of misinformation out there and if they come down tomorrow hopefully we can clear that up.”
If you are care about the future of your city, try to spare a few moments and head down to city hall. Often we hear from the vocal minority, which is great for keeping politicians honest, but if you are part of the silent majority maybe tomorrow is the day you have your say.
Either way, I hope we see some progress on Wednesday.